One bank with a presence in northeast Indiana has found a way to make a buck while throwing a lifeline to struggling borrowers.
Fifth Third Bank has launched a program that offers unemployed mortgage customers at risk of defaulting on their loans the opportunity to work with national placement firm NextJob to find a new job.
Fifth Third pays between $1,000 and $1,500 for each customer who enters the program.
If 20 people enter the program at a cost of $20,000 to $30,000, the bank would more than offset the expense if just one of the 20 found a new job and averted a default, said Larry Magnesen, Fifth Third senior vice president.
The bank loses $50,000 to $60,000 on each foreclosure, he said. Up to half of foreclosures involve job loss, he added.
Put into practice, the program is expected to generate much better results than the 10 percent success rate needed to cover its cost.
Fifth Third reported $845 million in mortgage banking earnings for 2012. During last year’s fourth quarter, the bank’s portfolio averaged $11.8 billion in residential mortgage loans. The Cincinnati-based bank and the Bend, Ore.-based coaching firm piloted the program in a limited area last year.
Although they declined to reveal how many people took part, bank officials reported that almost 40 percent of participants were working full time after six months.
And these weren’t necessarily the easiest of job searches. The borrowers who signed up had been out of work for almost two years – 22 months – on average.
Feedback from program participants showed many were lost when it comes to job hunting, Magnesen said.
Also, significant industry changes have eroded the foundations from under some once-solid occupations.
Those workers needed to learn how to repackage their skills.
‘Banks know that’
Fifth Third officials say theirs is the first bank to offer this type of service to borrowers.
They might be right.
Corey Carlisle, of the American Bankers Association, doesn’t know of any member bank that offers a comparable program.
This is really a great campaign, and we’re really proud of this initiative, he said.
Carlisle, who is senior vice president for bank community engagement, is based in the industry group’s Washington headquarters.
While he applauds Fifth Third’s efforts, Carlisle doesn’t think the program should become the default standard.
There’s certainly no silver bullet or no best way to reach out to customers who are in distress, he said.
A check of other banks in northeast Indiana didn’t find a program on par with Fifth Third’s job search services. Chase, Wells Fargo, PNC and Star Bank were each contacted.
While we don’t currently offer a program like the one you are researching, we are implementing new and ever-changing measures to help customers facing financial challenges; because nobody wins with foreclosures, Wells Fargo spokesman Tom Goyda said in an email.
JPMorgan Chase spokeswoman Christine Holevas offered a similar response.
While we don’t provide employment coaching for borrowers, we do offer mortgage relief to customers who are recently unemployed, she said in an email. We will review them for a forbearance that allows them to pay a reduced or no monthly mortgage payment for a period of time until they can get back on their feet.
The curious bank
Magnesen, who is based in Cincinnati, participated in the first meeting when Fifth Third officials discussed ways to address lingering issues after the housing bubble burst.
Many borrowers owed more at that time – October 2011 – than the properties were worth.
The bankers discussed lowering rates for borrowers in financial distress, but people who are unemployed can’t swing even a reduced mortgage payment, the banker said.
About that time, NextJob approached the bank with the suggestion that it could help jobless borrowers for a fee. Fifth Third officials were curious. That’s their official motto: The curious bank.
We are always asking, What are some things we can do to improve our customers’ lives?’ Magnesen said.
So they decided to try it.
The re-employment program has three parts. Participants talk one-on-one with a career coach for 10 to 16 weekly sessions.
They also have online access to advice about polishing résumés, finding openings and nailing interviews. The information, which includes webinars on various topics, is available anytime.
The program’s third part is a weekly conference call with an accountability group of eight to 10 other job seekers who are working with the same coach. The sessions offer support and suggestions.
Since the program was rolled out nationwide in February, hundreds of people have enrolled, Magnesen said.
George Eldridge, a retired Dana worker, likes the sound of Fifth Third’s job search assistance program.
The Fort Wayne man, who once ran a small recording studio, is a charter member of the Fort Wayne Black Chamber of Commerce. Eldridge, who isn’t a Fifth Third mortgage customer, looks at the issue through an entrepreneur’s eyes.
That’s just like investing back in your own business, he said. It pays dividends in that people will remember that (help) when they get back on their feet. I think it’s awesome.